Can Ella Cafe unreasonably withhold consent to a transfer by the developer?
Ella_Cafe Franchise · 2024 FDDAnswer from 2024 FDD Document
and ordinances; provided, however, that any release will not be inconsistent with any state law regulating franchising.
- 8.3. Transfer by Developer and/or Owners. Developer understands and acknowledges that the rights and duties set forth in this Agreement are personal to Developer and that Franchisor has granted rights under this Agreement in reliance on the business skill, financial capacity, and personal character of Developer and its Owners. Accordingly, neither Developer nor any Owner, nor any successor or assign of Developer or any Owner, will sell, assign, transfer, convey, give away, pledge, mortgage, or otherwise dispose of or encumber any direct or indirect interest in this Agreement or in the Business Entity without the prior written consent of Franchisor. Franchisor will not unreasonably withhold its consent to a transfer, but may condition its consent on satisfaction of any or all of the following.
- 8.3.1. Developer has provided Franchisor the following at least 120 days prior to the proposed closing date of the proposed transfer: (a) written request for Franchisor's consent to the transfer; (b) payment of the non-refundable transfer fee in the amount set forth in the Key Terms, plus reimbursement of Franchisor's reasonable attorneys' fees; and (c) a copy of the proposed asset purchase/transfer agreements, including sale terms.
- 8.3.2. The transferee has demonstrated to Franchisor's satisfaction that the transferee meets Franchisor's then-current educational, managerial, and business standards; possesses a good moral character, business reputation, and credit rating;
Source: Item 23 — RECEIPTS (FDD pages 50–181)
What This Means (2024 FDD)
According to Ella Cafe's 2024 Franchise Disclosure Document, Ella Cafe will not unreasonably withhold consent to a transfer by the developer. However, Ella Cafe may condition its consent on the satisfaction of certain requirements.
These conditions include providing Ella Cafe with a written request for consent to the transfer at least 120 days prior to the proposed closing date, payment of a non-refundable transfer fee (the amount of which is set forth in the Key Terms), reimbursement of Ella Cafe's reasonable attorney's fees, and a copy of the proposed asset purchase/transfer agreements, including sale terms. The transferee must also demonstrate that they meet Ella Cafe's then-current educational, managerial, and business standards, possess good moral character, business reputation, and credit rating, have the aptitude and ability to operate the Coffee House, and meet Ella Cafe's then-current financial requirements to become an Ella Cafe developer.
If the transfer is approved but does not close for any reason, the developer must reimburse Ella Cafe for its reasonable attorneys' fees incurred in connection with the abandoned transfer. Any transfer made without Ella Cafe's prior written consent will be considered null and void and will be a material breach of the Development Agreement. These stipulations are typical in franchising, as the franchisor needs to ensure that any new developer meets their standards and is capable of maintaining the brand's reputation and operational consistency.